What Are the Pros And Cons of Offering a Signing Bonus?

The hospitality industry has faced low staff retention rates for the longest time, with unprecedented turnover rates reported in most markets. After-effects of the pandemic continue to stifle the sector. The hotel industry in the United Kingdom is also grappling with Brexit headwinds, compounding an already dire situation. Some hospitality recruiters are designing innovative solutions to attract skilled workers, like offering a signing bonus to new hires.

Sign-on bonus payments have become fairly prevalent, owing in part to the drive to reopen restaurants (that had shut down because of COVID-19 regulations). According to an analysis by GlobalData, job ads offering a signing bonus shot up by over 450% in the period between August 2020 and August 2021.

In this article, you can learn what a signing bonus is, explore its pros and cons, and see how some hotel chains are using this recruitment strategy. You’ll also find alternatives for driving your hospitality business’ recruitment efforts.

What Is a Signing Bonus?

A signing bonus, sign-on bonus or hiring bonus is a financial reward offered to a prospective employee after they sign an employment contract. Employers tend to offer a hiring bonus to attract skilled workers for difficult-to-fill positions, particularly in tight labour markets. You can also offer a signing bonus to keep highly skilled workers who may be contemplating employment offers from other employers.

A hiring bonus can either be a one time payment or spread out over a defined period. Some employers also offer stock options as part of the signing bonus. You may provide this incentive to a new hire as a method of compensating for any benefits they might lose if they quit their current position. A signing bonus can also make up for discrepancies in the total compensation package you provide under the existing pay structure.

Different employers offer varying sign-on bonuses depending on the company size or the job role. Typical hospitality recruiters are offering up to £1,000 sign on bonuses for chefs, waiters, housekeepers, and security. The Hard Rock Hotel in Ibiza, Spain is offering staff a £170 bonus to find suitable employees. Harry’s Bar and Côte Bistro in the U.K. are offering upwards of £2,000 in new hire bonuses.[1]

Advantages and Disadvantages of Offering a Signing Bonus

Offering a sign-on bonus to your new hires has several advantages to your hotel business. Here are but a few:

Reduced labour cost: Because a signing bonus is a one-off payment, it represents a lower cost to your business over the long term. Unlike higher salaries paid over the tenure of the employee, a sign-on bonus does not burden your hospitality business in the long run.
Talent magnet: Offering a hiring bonus can help you attract skilled workers to your hotel/restaurant business. This can be critical when a candidate is considering multiple competing offers.
Employee retention: Spreading out a sign-on bonus can help you deal with restaurant staff shortage at a crucial time and deliver uninterrupted service to your customers.
Bridge compensation gaps: Offering a sign-on bonus can help you persuade a candidate to join your team despite not meeting their desired pay. This bonus could make your hotel jobs offer more appealing to a candidate.

However, a hiring bonus comes with several drawbacks.[2] For instance, it represents an additional cost to a hospitality business. Small businesses with little wiggle room may have to dig deeper to afford it, or else they won’t attract hospitality talent. For an employee, a sign-on bonus is taxable income which reduces the employees’ ultimate package. This may end up making the job offer unattractive. Still, an employee might underperform or leave the company, hence lowering the ROI. Moreover, paying a hiring bonus to only some employees can imply discrimination, which can lead to workplace resentment and lawsuits.

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Signing Bonus Trends in Hospitality Jobs

Here is a sneak peek of how some big hospitality and tourism players are using signing bonuses in their recruitment strategy.

Marriott: To meet the rising demand for its services, Marriott Vacations Worldwide Corp is offering sign-on bonuses to new hires in diverse roles. At an in-person hiring fair held in Orlando, Marriott offered $1000 sign-on bonuses for diverse roles such as housekeeping, safety and maintenance positions. They pay the bonus in two parts, with $500 paid after 30 days on the job, and the other half paid after new hires have worked 90 days.
Hilton: The Hilton hotel is also going big with hiring perks for both full and part-time employees. Examples of roles attracting signing bonuses include cleaners, desk agents, room attendants, housekeepers, and chefs. The bonuses range from $300 to $1500. Like the Marriott, Hilton is spreading out the pay-outs, with a portion paid a few weeks into the job and the rest paid after one year. Other perks include free meals on duty, discounted hotel rates and overtime pay.

Can Smaller Hospitality Businesses Keep Up With the Pace?

While big brands are more capable of shelling out large amounts of money, small to medium hotels and restaurants may not enjoy a similar luxury. High operating costs, regulatory requirements and tight margins make it harder for small establishments to keep up in the talent war. Take the example of Twenty Seven, a fine dining restaurant in the U.K. which implemented a £1,000 bonus to attract chefs.[3]

According to chef and restaurant owner Jamie Rogers, the establishment had to introduce a bonus to attract chefs after losing theirs to bigger competitors. These competitors offered better wages, ranging between £18-£20 per hour, which is not feasible for restaurants like Twenty Seven. Jamie’s struggles represent the dilemma small hotel owners face, balancing between talent acquisition/retention and keeping operational costs sustainable.

Alternatives to Signing Bonuses

While the sign-on bonus is a welcome addition to the array of benefits, it’s certainly not the silver bullet to the staffing crisis in the travel and leisure sector. This is particularly true for small hospitality businesses that can hardly afford to match up the bonuses offered by big players.

Below are alternative monetary perks and incentives that can help attract skilled workers to your hotel, restaurant or resort: